The Great Housing Boom of China

Kaiji Chen and Yi Wen

American Economic Journal: Macroeconomics, 2017, vol. 9, issue 2, 73-114

Abstract: China's housing prices have been growing nearly twice as fast as national income over the past decade, despite a high vacancy rate and a high rate of return to capital. This paper interprets China's housing boom as a rational bubble emerging naturally from its economic transition. The bubble arises because high capital returns driven by resource reallocation are not sustainable in the long run. Rational expectations of a strong future demand for alternative stores of value can thus induce currently productive agents to speculate in the housing market. Our model can quantitatively account for China's paradoxical housing boom.

JEL-codes: O16 O18 P24 P25 R21 R31 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/mac.20140234
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Citations: View citations in EconPapers (104)

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Related works:
Working Paper: The great housing boom of China (2015)
Working Paper: The great housing boom of China (2014)
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